NEW YORK (Fortune) -- Could Royal Bank of Scotland be the new AIG? AIG, of course, which was once sanguine about its exposure to securities backed by subprime mortgages, just confessed to a far bigger problem than it had previously admitted, and acknowledged that its internal valuation models were being questioned by its auditors. Royal Bank of Scotland, or RBS, has also been upbeat.

Last December RBS took a GBP 950 million, or roughly $1.9 billion, writedown on its mortgage holdings, which was less than the market was expecting, and said that it expected to produce an operating profit and earnings per share "well ahead of market consensus." RBS is also in the process of building a giant trading floor in Stamford, which is nothing if not an expression of confidence in the market.

But skeptics are predicting more problems when RBS (RBS) announces its results on February 28. On February 11, Morgan Stanley analyst Michael Helsby noted in a report that "it is now widely expected that RBS will announce further material write-downs." He also predicted that the bank would seek to raise money. RBS's stock, which soared some 15% through October, has since fallen more than 30% to $7.29. It trades at just over 5 times 2007's consensus earnings estimate. A Royal Bank of Scotland spokeswoman says that the bank "has absolutely nothing to say at this stage. We outlined our position clearly [in December], and we will update the market when we announce our results on February 28."

But there's good reason to worry, and to look for trouble both in an obvious spot - and a not-so-obvious spot.

RBS, which was founded all the way back in 1727, has grown, under the leadership of CEO Sir Fred Goodwin, from a medium sized operator into a global giant via a chain of daring acquisitions. Today, it is one of the ten largest banks in the United States thanks to its purchases of Citizens Bank of Rhode Island and, more recently, its 2004 $10.5 billion all-cash purchase of Cleveland-based Charter One. Most recently, of course, RBS was in the headlines over its battle to buy Dutch bank ABN Amro. RBS, along with partners Santander and Fortis, are currently in the process of carving up the spoils.

The first, and pretty obvious, problem is the exposure RBS has to super senior tranches of CDOs containing mortgage collateral via its Global Banking & Markets division. In December, when the bank announced its smallish (in the context of things) writedown, it also outlined that exposure. RBS said that net of hedges and writedowns, it had GBP 1.1 billion (or roughly $2.2 billion) of high grade CDOs containing commercial loan collateral, prime and subprime mortgage collateral, as well as GBP 1.3 billion (or roughly $2.6 billion) of exposure to "mezzanine CDOs based predominantly on residential mortgage collateral." RBS marked the high grade CDOs at 90% of face value, and the mezzanine CDOs at 70% of face value, citing "outputs from our proprietary model, market data, and prudent valuation adjustments."

Only RBS knows exactly what securities it owns, and the market price can vary dramatically. But a source on a Wall Street trading desk (who is not commenting on RBS specifically), says that in general, the high-grade CDOs are worth between 35 cents on the dollar and 75 cents on the dollar, and the mezzanine CDOs are worth between 10 cents to 50 cents on the dollar. That would imply substantial addition writedowns for RBS.

What no one is talking about, though, is the exposure RBS has to the U.S. mortgage market via RBS Citizens, through which RBS conducts the majority of its U.S. banking operations. According to data from the FDIC, as of September 30, RBS's U.S. operations had $45 billion worth of 1-4 family residential mortgages. Of that, $25 billion is secured by first liens. Another $11 billion is secured by junior liens. A significant chunk of that exposure comes from Charter One - which had a sizable subprime lending operation. Last fall, Charter One, like other banks, announced that it would stop buying mortgages from wholesale brokers.

Overall, it is impossible to know how much of Citizen's portfolio consists of subprime mortgages, but based on comments made by Lawrence K. Fish, the former CEO of Citizens Financial, it could be sizable. In a December editorial in the Washington Post, Fish wrote that the "number of homeowners in low and moderate income communities grew by 26.6 percent in the 1990s, nearly twice as fast as the number of homeowners in high income areas," and said, "Citizens Financial group has built a highly successful business around these emerging markets." Maybe this is good social policy - but it may not turn out to have been good financial policy.

While the $25 billion in first liens may be fine, the Wall Street source (who again is not commenting on RBS specifically) says that junior liens - even those that are prime - are, in general trading for between 40 cents to 80 cents on the dollar, and that home equity lines are going for between 35 cents to 70 cents on the dollar. That would imply more billions in writedowns for RBS.

*****

On a separate note, RBS could also have a problem with its leveraged lending book. According to a Lehman report last fall, RBS was the number two provider of European leveraged loans. Back in December, it announced a GBP 250 million (roughly $500 million) writedown, but did not detail the size of its portfolio. As recently as last summer, the bank's attitude seemed to be full steam ahead: Said CEO Goodwin in a June article, "There are no clouds on the horizon."

Good did add, though, "I'm touching wood as I say that." He may want to find a forest.